Manufacturing has been identified by South Africa as one the key sectors to focus on as it moves towards embracing the Fourth Industrial Revolution (4IR)
But the Council for Scientific and Research (CSIR) has warned that the sector is taking too long to bring in new technologies, placing it under grave threat.
Advanced manufacturing is key to creating millions of jobs and boosting South Africa’s economy. But it cannot happen without collaboration and investment in research
CSIR executive director of material science and manufacturing, Martin Sanne, says that technology-driven innovation has always caused business models to go extinct.
“What’s different today is that technology is advancing at a pace never experienced before in human history, and the pace will only increase. Disruptive change enabled by emerging technologies is happening in the global manufacturing sector as much as (if not more than) in any other sector,”
“This fundamental discontinuity with the past presents a threat as manufacturing firms that do not adapt quickly to this wave of change will not survive. On the other hand, firms that prepare for and embrace the new opportunities can become global players and grow exponentially.”
While South Africa and the rest of the continent have been urged not to duplicate countries leading 4IR and come up with solutions that will best suit African countries, there are areas we can learn from.
Sanne says Europe has identified six Key Enabling Technologies (KETs) concerning manufacturing. They involve knowledge and capital-intensive technologies associated with high research and development intensity, rapid and integrated innovation cycles, high capital expenditure and highly-skilled employment. Also, their influence is pervasive, enabling process, product and service innovation across the economy, and they can lead to structural change.
The KETs are:
- Industrial biotechnology;
- Advanced materials;
- Micro-nano electronics; and
- Advanced manufacturing systems.
Sanne says the rapid rise and convergence of emerging technologies is driving 4IR. It has enabled the convergence of other emerging technologies including virtual reality, advanced communications, big data management, product life cycle management, artificial intelligence, machine learning, and smaller and more powerful sensors that have become cheaper.
“By enabling ‘smart factories’, the 4th Industrial Revolution creates a world in which virtual and physical systems of manufacturing globally cooperate with each other in a flexible way.
“In a future in which production gets more networked, the complexity of production and supplier networks will grow enormously. Networks have so far been limited to single factories but (eventually these boundaries will be lifted to interconnect multiple factories across the globe. Such disruptive technologies will change the nature of manufacturing at industry and firm level,” he says.
Expected changes include:
- High-tech manufacturing processes such as 3D printing and nano and microscale structuring;
- Adaptive and smart manufacturing equipment and systems;
- Resource efficient factory design;
- Collaborative, mobile and networked enterprises and business models seamlessly linking supply chains to local production; and
- More customer focused manufacturing linking products and processes to innovative services.
New sources of value will also be unlocked such as opportunities to extensively package services with products, and remanufacturing end of life products to original specifications or better. There is also an opportunity to create value from new strategic alliances within and between sectors.
Sanne says that in the last century, industrial business models were defined by their use of machines to create increasing returns to scale. But digital business models use network effects to create what American inventor Ray Kurzweil describes as accelerating returns to scale.
New products are currently being manufactured and new industries are being created, which will create new jobs and factories that do not even exist today.
“This shift in thinking and manufacturing defines new rules of competition and ways of manufacturing. Failing to embrace or scale this shift will lead to current industries becoming obsolete by 2025,” warns Manne.
He says that within the broader manufacturing sector, advanced manufacturing has a particularly important role to play in re-industrialisation and the creation of decent, well-paying jobs.
Competitive advantage is increasingly dependent on combining new knowledge and improved technologies rather than the traditional factors of production like labour, materials and energy.
Manne has also downplayed concerns by labour that a focus on advanced manufacturing will impact negatively on jobs. If South Africa embraces new technologies, he believes that unemployment will not rise, but jobs will evolve, and job losses in one sector often mean gains in another.
“It is also well known that manufacturing activity is associated with good economic multipliers and an International Finance Corporation (IFC) study has also shown that the job multiplier effect rises as the manufacturing becomes more sophisticated, from about two for traditional manufacturing to 15 for the most advanced forms of manufacturing.
“This correlation is reflected in many studies for example by McKinsey which concludes that the SA economy can grow significantly higher than the current consensus estimates and create millions of new jobs, if led by a globally competitive hub of advanced manufacturing. It is estimated that advanced manufacturing can be a key to growing South Africa’s gross domestic product,” Manne says.
It is imperative that the country focuses on achieving greater economies of scale by aggressively pursuing export opportunities and becoming more innovative in materials, products and manufacturing processes.
Also, the need for increased investments in research and development, and tighter and more collaborative networks are just as important, he says.